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Two Stage 2 × 2 Games With Strategic Substitutes and Strategic Heterogeneity

Tarun Sabarwal () and Hoa VuXuan
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Hoa VuXuan: Department of Economics, The University of Kansas

No 201902, WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS from University of Kansas, Department of Economics

Abstract: Feng and Sabarwal (2018) show that there is additional scope to study strategic complements in extensive form games, by investigating in detail the case of two stage, 2×2 games. We show the same for two stage, 2 × 2 games with strategic substitutes and with strategic heterogeneity. We characterize strategic substitutes and strategic heterogeneity in such games, and show that the set of each class of games has infinite Lebesgue measure. Our conditions are easy to apply and yield uncountably many examples of such games, indicating greater possibilities for the manifestation and study of these types of interactions. In contrast to the case for strategic complements, we show that generically, the set of subgame perfect Nash equilibria in both classes of games is totally unordered (no two equilibria are comparable). Consequently, with multiple equilibria, some nice features of strategic complements that depend on the complete lattice structure of the equilibrium set may not transfer to the case of strategic substitutes or strategic heterogeneity.

Keywords: Strategic substitutes; strategic complements; strategic heterogeneity; two stage game; extensive form game (search for similar items in EconPapers)
JEL-codes: C60 C70 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2018-12
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
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